Foschini Group Limited · JSE:TFG
Foschini — The Foschini Group — H1 2012 Earnings Presentation
49 slides from Foschini's earnings presentation, September 2011
Slide 1: Analyst Presentation for the Half-Year Ended 30 September 2011
ANALYST PRESENTATION FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2011 1 | TFG ANALYST PRESENTATION SEPTEMBER 2011
Slide 2: Agenda
AGENDA • The economy and retail environment Doug Murray • Review of the period Doug Murray • Financial review Ronnie Stein • Divisional review Doug Murray • Financial services Peter Meiring • Outlook Doug Murray • Questions All 2 | TFG ANALYST PRESENTATION SEPTEMBER 2011
Slide 3: The Economy and Retail Environment
THE ECONOMY AND RETAIL ENVIRONMENT 3 | TFG ANALYST PRESENTATION SEPTEMBER 2011
Slide 4: The Economy and Retail Environment
THE ECONOMY AND RETAIL ENVIRONMENT • During the 3rd quarter of 2011 financial risk around the globe surged closer to a critical level • South Africa, with its open economy, is not escaping the uncomfortable international situation and the economic outlook has deteriorated on the back of internationa
Slide 5: Review of the Period
REVIEW OF THE PERIOD 5 | TFG ANALYST PRESENTATION SEPTEMBER 2011
Slide 6: Review of the Period
REVIEW OF THE PERIOD • Our group trades in the mass-middle market space and our customers have benefited from: • Continued low interest rates • Real wage increases • Low inflation environment, albeit rising • Continue to reap benefits of our strategic initiatives: • Supply chain • CRM - growth in ac
Slide 7: Review of the Period Continued
REVIEW OF THE PERIOD CONTINUED • Group turnover up 18,5% to R5,4 billion • Headline earnings per share up 25,6% to 341,9 cents • Operating margin increased to 22,9% from 22,0% • Interim dividend increased by 37,7% to 190,0 cents per share • Net bad debt as a percentage of closing debtors‟ book at 9,
Slide 8: Review of the Period Continued: Merchandise Categories
REVIEW OF THE PERIOD CONTINUED September 2011 September 2010 % Same store Retail turnover by merchandise category (Rm) (Rm) % Growth growth Clothing 3 695,4 3 081,9 19,9 12,9 Jewellery 531,4 494,8 7,4 1,5 Cellphones 506,8 391,6 29,4 23,9 Cosmetics 344,3 309,9 11,1 6,4 Homeware & furniture 350,4 303,
Slide 9: Review of the Period: RLC Comparison
REVIEW OF THE PERIOD: RLC COMPARISON TFG vs RLC 35 30 25 20 15 10 5 0 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-10 Oct-10 Nov- 10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 TFG 12,0 14,7 20,1 26,5 19,9 21,1 26,1 31,9 19,6 17,7 19,7 18
Slide 10: Financial Review
FINANCIAL REVIEW 10 | TFG ANALYST PRESENTATION SEPTEMBER 2011
Slide 11: Financial Review: Half-Year Ended September 2011
FINANCIAL REVIEW: HALF-YEAR ENDED SEPTEMBER 2011 September 2011 September 2010 Income Statement for the period ended (Rm) (Rm) % change Retail turnover 5 428,3 4 581,6 18,5 Cost of turnover (3 156,0) (2 674,0) Gross profit 2 272,3 1 907,6 Interest received 813,0 736,3 Dividends received 5,7 6,3 Othe
Slide 12: Revenue
REVENUE September 2011 September 2010 (Rm) (Rm) % Growth Retail turnover 5 428,3 4 581,6 18,5 Interest received 813,0 736,3 10,4 Dividends received 5,7 6,3 (9,5) Other revenue 568,1 434,7 30,7 Group total 6 815,1 5 758,9 18,3 • Good growth in retail turnover (albeit against World Cup inflated base)
Slide 13: Gross Profit
GROSS PROFIT September 2011 September 2010 (Rm) (Rm) Gross profit (Rm) 2 272,3 1 907,6 Gross margin (%) 41,8 41,6 • Input margin constant • Improved pricing passed on to customers • Markdowns well controlled 13 | TFG ANALYST PRESENTATION SEPTEMBER 2011
Slide 14: Interest Received
INTEREST RECEIVED September 2011 September 2010 (Rm) (Rm) % Growth Trade receivables – retail 405,5 344,4 17,7 Receivables - RCS Group 400,2 385,2 3,9 Sundry 7,3 6,7 9,0 Total 813,0 736,3 10,4 • Due to the impact of the NCA capping formula, interest yields at their lowest • Increase in interest rece
Slide 15: Trading Expenses
TRADING EXPENSES September % to turnover September % to turnover % Growth 2011 (Rm) 2011 2010 (Rm) 2010 Depreciation and amortisation (149,8) 2,8 (137,1) 3,0 9,3 Employee costs (905,1) 16,7 (761,0) 16,6 18,9 Occupancy costs (494,2) 9,1 (434,8) 9,5 13,7 Occupancy costs – lease liability adjustment (1
Slide 16: Employee Costs
EMPLOYEE COSTS September 2011 September 2010 (Rm) (Rm) % Growth Employee costs - retail 780,5 665,4 17,3 Employee costs: share-based payments (IFRS 2) – retail 39,9 19,0 Employee costs – RCS Group 84,7 76,6 10,6 Total employee costs 905,1 761,0 18,9 % to turnover 16,7 16,6 • Staff increases this yea
Slide 17: Interest Paid
INTEREST PAID September 2011 September 2010 (Rm) (Rm) % Growth Interest paid 137,1 122,0 12,4 • Finance charges increased due to investment in debtors, stock and capital expenditure 17 | TFG ANALYST PRESENTATION SEPTEMBER 2011
Slide 18: Segmental Analysis
SEGMENTAL ANALYSIS September 2011 September 2010 (Rm) (Rm) % Growth Retail 955,0 764,1 25,0 RCS Group 151,9 121,8 24,7 Total profit before tax 1 106,9 885,9 24,9 • Retail produced a good result with 25,0% growth • RCS Group • Good performance – up 24,7% on last year • Contribution to PBT (before min
Slide 19: Financial Position
FINANCIAL POSITION • Our group‟s balance sheet remains strong • The next few slides deal with key elements of our financial position 19 | TFG ANALYST PRESENTATION SEPTEMBER 2011
Slide 20: Stock and Creditors
STOCK AND CREDITORS September 2011 September 2010 (Rm) (Rm) % Growth Stock of merchandise 1 692,7 1 310,6 29,2 • Off a low base (-4,2%) stock increased 29,2% in respect of new stores and expected levels of trading • At appropriate levels for current trading and start of November/December period Sept
Slide 21: Trade Receivables
TRADE RECEIVABLES September 2011 September 2010 (Rm) (Rm) % Growth Loan receivables 948,0 801,0 18,4 Private label card receivables 2 186,6 1 905,1 14,8 RCS Group 3 134,6 2 706,1 15,8 Trade receivables – retail 4 155,8 3 388,5 22,6 Total receivables 7 290,4 6 094,6 19,6 • Total receivables on balanc
Slide 22: Borrowings and Non-Controlling Interest Loan
BORROWINGS AND NON-CONTROLLING INTEREST LOAN September 2011 September 2010 (Rm) (Rm) Interest-bearing debt and non-controlling interest loan 3 074,6 2 134,7 Less: Preference share investment (200,0) (200,0) Less: Cash (468,6) (296,9) Net borrowings 2 406,0 1 637,8 Less: SBSA loan to RCS Group (non-c
Slide 23: Cash Generation and Utilisation
CASH GENERATION AND UTILISATION September 2011 Rm (Rm) Net borrowings at beginning of the period (2 023,4) Cash EBITDA 1 317,1 Increase in creditors 56,9 Increase in inventory (38,6) Other net investing activities 10,2 Cash generated 1 345,6 Taxation paid (344,6) Dividends paid (455,8) Retail & othe
Slide 24: Capex
CAPEX September 2011 September 2010 (Rm) (Rm) Stores 149,9 83,2 RCS Group 12,7 3,9 IT 92,1 34,8 Other 21,0 26,5 Total 275,7 148,4 • The majority of capex relates to opening of new stores, in line with our strategy of growing floor space • Budgeted capex for 2012 year-end will be approximately R540 m
Slide 25: Divisional Review
DIVISIONAL REVIEW 25 | TFG ANALYST PRESENTATION SEPTEMBER 2011
Slide 26: Divisional Review: Overall
DIVISIONAL REVIEW: OVERALL September 2011 % Same store Turnover (Rm) % Growth growth Number of stores Foschini division 2 067,1 18,4 12,5 500 Markham 920,2 22,7 16,9 256 Exact 533,6 25,3 21,4 210 TFG Sports 964,7 17,8 7,3 350 Jewellery division 592,4 10,3 4,5 389 @home 350,3 15,5 11,6 84 Group total
Slide 27: Divisional Review: Overall Continued
DIVISIONAL REVIEW: OVERALL CONTINUED • Foschini • Clothing turnover growth promising at 20,6% and clothing same store turnover growth of 14,4% • Markham • Clothing turnover growth of 22,3% and clothing same store turnover growth of 16,5% • Exact • Focus on clothing price points continues to be succe
Slide 28: Divisional Review: New Brands
DIVISIONAL REVIEW: NEW BRANDS • Charles & Keith • Fashion-forward ladies footwear and accessories brand • International presence with over 200 stores in 28 countries • Our first store opened in Canal Walk in August 2011 • Performing better than viability • Further stores to be rolled out • Fabiani •
Slide 29: Divisional Review: Africa Expansion
DIVISIONAL REVIEW: AFRICA EXPANSION • Rest of Africa (excluding South Africa) now 70 stores with turnover of R419 million annualised • All African stores are corporate stores Proposed additions Locations 2011 2012 2013 2014 Total Namibia 56 3 9 8 76 Botswana 6 5 5 - 16 Zambia 4 8 - - 12 Swaziland 4
Slide 30: Financial Services
FINANCIAL SERVICES 30 | TFG ANALYST PRESENTATION SEPTEMBER 2011
Slide 31: Financial Services Agenda
FINANCIAL SERVICES AGENDA • Financial Services Overview • Credit landscape • TFG Financial Services • Period overview • Performance • Book • Statistics • Strategy and outlook • RCS Group • Overview • Financial review • Performance • Financial position & treasury • Funding diversity • Strategy and ou
Slide 32: Financial Services: Credit Landscape
FINANCIAL SERVICES: CREDIT LANDSCAPE • Credit landscape • Economic recovery stutters as employment growth remains weak and global factors such as the Euro zone crisis and US monetary policy create uncertainty • Cost push inflation factors, especially fuel and energy costs, causing CPI to rise • Repo
Slide 33: TFG Financial Services
TFG FINANCIAL SERVICES 33 | TFG ANALYST PRESENTATION SEPTEMBER 2011
Slide 34: TFG Financial Services: Period Overview
TFG FINANCIAL SERVICES: PERIOD OVERVIEW • Performance of book within target range • New accounts opened increase by 28,2% on LY • Book grows by 22,6% • Weighted NCA rates down by 2,3% in comparative 6 months • Interest income rises by 17,7% (LY 11,2%) despite rate reduction • Improved recoupment of
Slide 35: TFG Financial Services: Performance
TFG FINANCIAL SERVICES: PERFORMANCE* September 2011 September 2010 (Rm) % Growth (Rm) Interest income 405,5 17,7 344,4 Net bad debt (243,4) 30,2 (186,9) Credit costs (97,9) (7,5) (105,8) 64,2 24,2 51,7 Other net income 149,4 20,2 124,3 Profit before tax 213,6 21,3 176,0 • Interest growth • Bad debt
Slide 36: TFG Financial Services: Book
TFG FINANCIAL SERVICES: BOOK Key debtor statistics September 2011 September 2010 Number of active accounts („000) 2 388,8 2 121,7 Credit sales as a % of total retail sales 63,1 61,8 Net debtors‟ book (Rm) 4 155,8 3 388,5 • Active accounts growth of 12,6% • Book growth of 22,6% reflects the expansion
Slide 37: TFG Financial Services: Statistics
TFG FINANCIAL SERVICES: STATISTICS Key debtor statistics September 2011 September 2010 March 2011 Arrear debtors % to debtors‟ book 20,4 21,6 20,7 Net bad debt write off as a % of credit transactions 4,7 4,7 4,7 Net bad debt write off as a % of debtors‟ book 9,3 9,5 9,2 Doubtful debt provision as a
Slide 38: TFG Financial Services: Strategy and Outlook
TFG FINANCIAL SERVICES: STRATEGY AND OUTLOOK • Active account base growth remains a key focus area (anticipated 7,0% to 10,0% at year-end) • Maintain double digit growth in publishing and insurance • Launch of cash rewards in November 2011 expected to gather intelligence on cash customers‟ behaviour
Slide 39: RCS Group
RCS GROUP 39 | TFG ANALYST PRESENTATION SEPTEMBER 2011
Slide 40: RCS Group: Overview
RCS GROUP: OVERVIEW • Positive trading momentum continued in first half of the year • New national retailers signed up offering greater credit card utility • New acquisition channels in loans contributing to a strong loan advance growth • Better asset quality resulting in lower net bad debt • Strong
Slide 41: RCS Group: Financial Review
RCS GROUP: FINANCIAL REVIEW September 2011 September 2010 % Growth (Rm) (Rm) Interest income 403,3 387,7 4,0 Other income 218,4 193,0 13,2 Total credit income 621,7 580,7 7,1 Net bad debt (102,0) (137,0) (25,5) Operating costs (265,8) (230,1) 15,5 EBIT 253,9 213,6 18,9 Interest paid (102,0) (91,8) 1
Slide 42: RCS Group: Performance
RCS GROUP: PERFORMANCE Key debtor statistics September 2011 September 2010 Number of active accounts („000) 704 646 Net debtors‟ book (Rm) 3 135 2 706 Arrear debt as a % of total debt1 9,5% 12,4% Non-performing loans as a % of total debt2 6,7% 9,0% Net bad debt write-off as a % of debtors‟ book 6,2%
Slide 43: RCS Group: Financial Position & Treasury
RCS GROUP: FINANCIAL POSITION & TREASURY Capital ratios September 2011 September 2010 Return on equity 18,8% 17,1% Debt:equity 63,2% 62,2% • Financial position • Low gearing with excess capital (70% target ratio) • ROE improvement despite low gearing ratio • Treasury • Successful DMTN program contin
Slide 44: RCS Group: Funding Diversity
RCS GROUP: FUNDING DIVERSITY Current 42% 11% 16% 31% August 2010 59% 15% 8% 18% Prior to DMTN 86% 14% 0% 20% 40% 60% 80% 100% Shareholders Banks Commercial Paper Bonds Note: Funding above depict total funding facilities (drawn facilities show further diversification) 44 | TFG ANALYST PRESENTATION SE
Slide 45: RCS Group: Strategy and Outlook
RCS GROUP: STRATEGY AND OUTLOOK • Outlook • Expectation of current profit growth to continue for the remainder of the year • Adequate funding facilities in place to deliver business plans • Continue capital markets activity through periodic fund raising efforts • Growth • Expand private label and co
Slide 46: Outlook
OUTLOOK 46 | TFG ANALYST PRESENTATION SEPTEMBER 2011
Slide 47: Outlook for Second Half of 2012
OUTLOOK FOR SECOND HALF OF 2012 • The positive consumer sentiment with improved consumer spending may slow in the second half • Caution is warranted given the very difficult and fragile global financial environment • Supply chain initiatives ongoing • CRM initiatives to continue • Constant focus on
Slide 48: Thank You
THANK YOU 48 | TFG ANALYST PRESENTATION SEPTEMBER 2011
Slide 49: Disclaimer
DISCLAIMER This announcement contains certain forward-looking statements with respect to the financial condition and results of operations of The Foschini Group Limited and its subsidiaries, which by their nature involve risk and uncertainty because they relate to events and depend on circumstances